Angel Broking explains five Golden Rules of Equity Investments
08 Jan 2016 | 01:00PM
Investing can be exciting and rewarding when investors adhere to stock market basics. There are several stories of people who have earned exceptional returns through stock investing.
Beginner's Guide for Stock Market
Before you go ahead to reap profits from the trade, here are a few share market basics for beginners which you need to know:
Understand the Entire Procedure:
Every person begins with the basics when starting anything new. This rule is applicable when investors decide to invest in the Indian stock market as well. There is plenty of information available on the Internet that can be used to understand the basics of the stock market, investing, and other related concepts. Investors can also find useful information from their service providers from whom they avail demat and trading accounts.
Learn to Choose:
While investing, it is crucial to enter the market at the right time when the shares are trading at their lowest levels. Similarly, exiting when the prices are peaking is important. Investors must also make the right choice about the companies in which they want to invest. It is common for many investors to follow the herd mentality rather than following professional traders and analyst reports. Though this may help to gain an understanding of the workings of the market, investors need to use their discretion before making investment decisions. An individual must understand his personal needs and preferences while choosing the sectors and stocks. Moreover, not every company is profitable, and doing the research and due diligence before investing will help mitigate some risks associated with stock market investing.
Determine the Investment Amount:
Investors must be prudent on how much exposure they take in various financial products. Some of the available instruments include shares, bonds, mutual funds, and derivatives. Although diversification is a good idea to mitigate market movement risks, investors must invest only in those products that they understand. In addition, limiting the investment in high-risk products to amounts that they can afford to lose without facing a financial crunch, is crucial. This is an important stock market tip, which is often overlooked by investors in the hope of making huge profits.
Track and Review the Portfolio:
It is not uncommon for investors, especially long-term investors, to invest in certain products and then not look at these until they want to exit. This is one of the biggest errors while investing in the stock market. The markets are dynamic and volatile; even the smallest news or event can result in huge movements to the performance of various products. This is why it is important for investors to regularly track the performance of their various investments and review it. If any news or event significantly affects their product portfolio, the necessary modifications must be made to minimise the potential losses resulting from the share market investments.
Learn from Errors:
Professional traders with several years of experience make mistakes. So, if a beginner makes erroneous decisions, he must not be disheartened. Investing is a learning experience and making mistakes is an inbuilt component. While reviewing their portfolios, investors must learn to identify and learn from their mistakes to ensure that errors are not repeated in the future. The experience of investing in different products and leraning from mistakes is the best teacher that helps a beginner become a seasoned investor.
When investors stick to the stock market basics, they can sail smoothly even through difficult market conditions. They will not only be successful but can also enjoy a secured financial future.